“We want to focus on innovative product offerings for investors”
In this exclusive interview, Harish Krishnan, Co-CIO and Head of Equity at Aditya Birla Sun Life AMC, says that he believes the Indian investment theme, led by manufacturing and infrastructure creation, to be a promising prospect in the medium term.
With nearly two decades of experience in asset management, how has your investment philosophy evolved over the years?
Starting off as a stock-picker, I realised over time that managing money is more than finding the next multibagger. Over time, risk management, behavioural dynamics and quant frameworks to help build repeatability in the process of managing money have gained more importance in my quest to be a better money manager.
How do you interpret the current market dynamics, especially in light of global economic uncertainties like inflation and geopolitical risks?
Businesses always wade through uncertainty, and this time is no different. Good businesses have the resiliency to overcome uncertainties as they continue to delight their customers. While Donald Trump’s presidency is likely to come with its share of increasing unpredictability of business, we believe the markets will settle down in the first few months of his presidency. Post that the global macro scenario is likely to give way to micro-focus on business fundamentals and their ability to reinvest their cash flows profitably into newer growth avenues.
With India’s economy projected for steady growth, which sectors do you believe are poised for outperformance in the medium to long term?
We believe the Indian investment theme, led by manufacturing and infrastructure creation, to be a promising prospect in the medium term, as Indian private capex comes from almost a decade of slumber and with healthy balance sheets. Similarly, Indian competitiveness globally is on the rise, and we expect India’s share of global exports to rise meaningfully this decade. These are two bigger themes from a medium-term perspective we are positive on. India’s consumption in the near term is on the weaker side, but we believe it to be transient and would expect a comeback in the medium term.
Could you elaborate on your approach to portfolio diversification in volatile markets?
Our top-down view provides sectors with a positive view in the medium term, which we mark as sectors to increase allocation on dips and other sectors where we want to book profits on the rise. Currently, sectors like metals, cement, consumer durables and private banks are our ‘dark horse’ sectors – which are contrarian bets post their medium-term underperformance and under-ownership. By diversifying across sectors and business cycles, we attempt to create a portfolio that has near-term catalysts as well as businesses that can play out in the medium term.
Aditya Birla Sun Life AMC recently launched innovative products like the Conglomerate Fund. What are your plans concerning new product offerings in 2025?
We would want to focus on innovative product offerings that aim to provide differentiated risk-reward solutions for our investors.
Given the increasing popularity of Small-Cap funds, what risks and opportunities should retail investors consider in 2025?
The last 3.5 years since the pandemic have provided wonderful wealth-creation opportunities for investors. Risk has been well-rewarded, especially as earnings from a very depressed base in the pre-pandemic phase have jumped up significantly. However, over the last few quarters, we have seen earnings growth for Large-Caps, Mid-Caps, small-caps and micro-caps converge. Valuations of many a small-cap or micro-cap stock have moved up significantly and are often at a premium to large-caps in the same sector. Given this, we would suggest investors to come with a longer timeframe, and to use any volatility to increase their allocations.
How do you balance long-term wealth creation for investors with short-term performance expectations?
We have really very low control over near-term performance, thus our portfolio construction focuses on the medium to long term. While our portfolio has few companies that have near-term catalysts, our preference is to buy good businesses that are scalable as well as sustainable and allow for time to help in compounding.
What advice would you offer to retail investors who are entering the equity markets for the first time?
All investors, first-time or veterans, make mistakes. It is important to learn from those mistakes to not repeat the same. Investment outcomes are a function of luck and skill, and in the near term, strong gains can cause one to attribute these gains to their skills. Investors will be better served to notice a few business cycles to gauge their own skillsets. More importantly, the biggest edge one has in investing is behavioural rather than analytical and one is exposed to these only as one goes through some downcycles to gauge one’s own risk appetite. Over time, investors will be better judges of their own behavioural tolerances as well as their analytical capabilities.
Disclaimer: The opinions expressed above are personal and may not reflect the views of Dalal Street Investment Journal.